- A project has a 0.7 chance of doubling your investment in a year and a 0.3 chance of halving
your investment in a year. What is the standard deviation of the rate of return on this investment?
- Investors expect the market rate of return this year to be 10%. The expected rate of return on a stock
with a beta of 1.2 is currently 12%. If the market return this year turns out to be 8%, how would you
revise your expectation of the rate of return on the stock?
